Why does market failure with common resources occur
A)The government imposes a negative externality on everyone's consumption of the resource.
B)Society is unable to value the social loss that results from individual consumption.
C)Consumption can be privately beneficial even when it is socially undesirable.
D)Consumption of the common resources creates positive externalities.

Question

Quizplus · Accepted Answer

Market failure with common resources occurs because consumption can be privately beneficial (such as fishing or hunting) even when it is socially undesirable (due to depletion of the resource). Individuals do not take into account the negative impacts their consumption has on the resource as a whole. As a result, the resource is overused and under-maintained, leading to market failure.

Why Does Market Failure with Common Resources Occur